GS: Well, you're an investment banker through and through. And we've just watched Lehmans and Bear Sterns go belly up, and the rest of us are on shaky ground. Basically, we've all done some pretty risky things. We're going to be OK if we can get past a nasty cashflow problem. And Morgans are probably the same.So what can you do to get us a few thousand million dollars to keep us afloat?

HP: I can't slide money to you because that would look like favouritism. But Congress has already voted money for the support of banks. If you and Morgans were bank banks instead of investment banks, then you can access guaranteed loans from TARP - and also some of the TARP money.

GS: yes, but we are not banks.

HP: but if you were.....

GS: Look, when you were chairman, you got us exempted from loads of capital requirements, regulations and stuff. Can't you just make a few calls and fix this?

HP: My hands are tied: I can only help bank banks.

GS: we've just been through this: we are not bank banks.

HP: (sighs) Yes, but if you were......

Pause

GS. Ah. Can I call you back?

Later the same day

GS: Hi, Hank - it's good we've got your home phone number - you must be under water at the office. Now, here's what we propose - and I've had a word with Morgans, too. We are going to convert to be banks. OK, so we'll have to do bank-style regulation but that's no big deal 'cos the regulators have never seen anything like us so they don't know how to regulate us anyway. Then we'll apply for TARP assistance.That means we can borrow money cheap under the guarantee scheme, and that will shore up our capital. And if our capital is shored up with underwritten borrowing, then we don't have to worry about building it up from reserves.

HP: (wearily, like a teacher talking to a child that's been led to a book and told the answer is on the open page) that's a good idea.

GS: even better: because it's just us and Morgans now, we're going to be able to cream off all the choice deals - and that means fat profits. So we'll give back the TARP money, and we'll pay ourselves fuck-off bonuses. But we'll keep using the TARP guarantees because that gives us access to cheap capital so we can make even more money with no risk to our shareholders. So our shareprice rises, our bonuses go back to pre-jitters levels and we'll be looking for a new Chairman in about two years.

HP: As you know, I sold all my shares in GS before taking up my post as Treasury Secretary. Now all my shareholdings are in a blind trust so I don't know what I hold nor what I'm earning or whether the shares are performing.

GS: that's a trust called HP Share Trust, right? I'm sure it will be OK. Anyway: there's just one last part to this strategy: in a couple of years, we'll release the guarantees and then we can convert back to investment bank status - that's probably before we even get a regulatory inspection.

HP: It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation. The Subprime crisis is largely contained: we have the strongest global economy we've had in decades.

July 2009:

GS: Hank - so sorry you aren't with Treasury any more. Actually, do you know you've become a non-person on the Treasury website where your biog used to be? Anyway: the good news is that we've repaid all the TARP funds and we are running on the cheap capital we could raise using the TARP guarantees. And we've made more than USD 3,000 million - so we're going to pay bonuses of double that. That should keep our balance sheet depleted so no-one asks why we are still using taxpayer risk to back private profit.

HP: (sarcastically) excellent.

GS: sad to hear you were getting a roasting over the BofA / Merrill deal. Did you really tell Ken Lewis that if he didn't do the deal you'd send the boys in?

HP: I told everyone the same, kinda. Yes, I told Lewis to take over Merrill or the regulators would take an interest - just the same as I told the big nine banks that they had no choice in the matter: they would be required to take government support and if they didn't we'd ensure the regulators made it a requirement.

GS: so we were lucky you didn't play hardball with us, then.

HP: well, you know how it is. I knew Obama would replace me, and I knew that the IMF was favouring Brown after his "I saved the world" remark, even though I've already got my feet under one of the tables there. So I had to leave somewhere I might be able to go and I know you're going to be looking for a new chairman in a year or so.

GS: well, that's good to hear. Tell you what. I'll send you an e-mail.

HP: I never used e-mail when I was at the Treasury and I don't use it now. Do you still have my home number?